By Swann Bigot, legal expert and consultant in international affairs, for Eurasia Network – August 26, 2017


Wind turbines, May 2017 – Source : S.B.

The French energy leader ENGIE has subcontracted China Machinery Engineering Corporation (CMEC) to build a 55 MW wind farm in Mongolia with start of power generation in the second half of 2018. The Danish manufacturer Vestas will supply wind turbines while construction will be overseen by Tractebel, ENGIE’s engineering arm and will start this summer, revealed a press release.

The facility is located at 450 km south-east of Ulaanbaatar near the city of Sainshand, capital of the Dornogobi province and is expected to boost the local and national economy through job creation, fiscal contributions and the supply of clean energy.

Construction phase follows three years of wind surveys to measure the high-yield winds in the area. The country offers good conditions for wind power generation as the average wind speeds at the site are from 7 to 8.5 meters per second, which is ideal for onshore wind energy.

International funding

The 55 MW wind farm will be funded by a $120 million project-financing package supplied by the European Bank of Investment and the European Bank for Reconstruction and Development, along with a group of international investors made of French energy leader ENGIE, German project developer Ferrostaal, Danish Climate Investment Fund (DCIF) and Mongolian entrepreneur, Radnaabazar Davaanyam, according to a EBRD’s press release. Sainshand Salkhin Park LLC is the third wind power project to be financed with international funds.

The lenders have agreed to provide a total project financing of USD 78.5 million, which comprises EIB funding of USD 47 million, of which the first tranche will be guaranteed by EKF, Denmark’s Export Credit Agency, with NORD/LB acting as agent and EBRD funding of USD 31.5 million.

Read also: Italian company Enel will build the largest wind farm in Arctic

The EIB stated that it is “committed to supporting climate-related investments in Asia and is pleased to support the development of wind power in Mongolia, which is an alternative to the use of coal.

Financing has been agreed following preparation of a comprehensive environmental and social management system compliant with international standards such as those of the EBRD, EIB, International Finance Corporation (IFC) and the Equator Principles, reported the EBRD.

Reduce the national carbon emissions

Once operational, the new Sainshand wind farm will significantly contribute to reducing Mongolia’s carbon emissions and cater for an expected increase in power demand in the country. Indeed, the wind farm made of 25 Vestas V110 2.2MW wind turbines will provide the equivalent of the electricity consumption of 130,000 people in Mongolia with a reduction of carbon emissions by 200,000 tons.

The project has been developed in consultation with the local communities and a detailed environmental impact assessment has been approved by the relevant national authority, according to the EBRD.

Paul Maguire, CEO of ENGIE Asia-Pacific, said in a press release : “ENGIE’s ambition is to provide energy access-for-all through clean and renewable energy sources, especially to developing communities. Mongolia is facing an energy challenge due to increasing demand from industrialization and urbanization. As our first renewable energy project in Mongolia, ENGIE’s investment in the Sainshand wind farm is consistent with our vision of leading the global energy transition, and the drive for decarbonisation will significantly contribute to powering the country’s energy needs in a sustainable way.”

So far, Mongolia has only 50 MW of operating wind-power capacity, from the Salkhit project, which came online in 2013. The 50 MW Tsetsii wind farm is due to be commissioned later this year.

In its move towards clean energy, Mongolia has decided to increase its national renewable energy capacity in partnership with the European Union.

Thus, the EU Ambassador to Mongolia, Hans-Dietmar Schweisgut, stated : “Mongolia and the European Union have signed the Paris Climate Agreement, and the new Sainshand wind farm is the evidence of the close partnership between Europe and Mongolia to reduce carbon emissions with the use of renewable energy sources.”

Ambitious renewable energy targets

The Mongolia’s primary electricity grid has not been expanded and adapted to meet the needs of population growth and shifting settlement patterns since the 1970’s. The government now aims to establish a stable, continuous supply of power to meet its increasing domestic electricity demand while increasing the production share of renewables and reducing negative environmental impact from traditional power generation and greenhouse gas.

Mongolia even hopes to become an electricity exporting country, primarily through renewable energy sources, to the vast Northeast Asian region, including to consumers in Russia, South Korea, Japan, and China.

In this context, the government supports the use of renewable energy sources in accordance with a bill adopted in 2007, which sets tariffs for supply and regulatory framework.

The Mongolia’s first 50 MW wind farm opened in July 2013 in the Salkhit region while an agreement for another 50 MW wind farm under the name “Tsetsii Wind Farm project” was signed in September 2016.

Moreover, the country’s wind proven potential reaches 1100 GW. Therefore, the Mongolia’s Ministry of Energy confirmed in its wind power development road map that wind power will be developed as one of the country’s most significant resources.

Read also : EBRD will finance the largest solar farm in Kazakhstan

Besides, the U.S. National Renewable Energy Laboratory estimates that Mongolia has 2.6 terawatts (TW) of total renewable energy potential. The Gobi Desert has been identified as a suitable location for construction of both solar facilities, including concentrated solar, and wind power plants.

Renewable energy sources amounted to about 7.9% of the total installed generation capacity of Mongolia in 2015. National authorities have set ambitious goals – to increase this figure by 20% in 2020 and 30% in 2030.

Finally, the “State Policy on Energy 2015-2030” aims to transfer the state dominated energy sector into private based competitive market and to support innovation and advanced technology in energy sector.

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© Copyright 2017 – Swann Bigot, legal expert and consultant in international affairs.

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